Cambodian-Chinese Entrepreneurship in Phnom

Penh: Results from Preliminary Findings

Michiel Verver

Phnom Penh, 25 March 2011

Presentation outline

• Background of the research

• Interview topics

• Preliminary findings• Patterns throughout the interviews

• Examples

• Business in a historical context

• Questions for discussion

Background of the research

• Why studying entrepreneurship?

• The theoretical debate: Ethnic Chinese entrepreneurship in Southeast Asia

• Family business…

• Networking arrangement…

• Locally grounded…

• Notions of ‘Chineseness’…

The Interviews

Who are the interviewees?

• Cambodian-Chinese entrepreneurs (2nd or 3rd generation).

• Companies of differing size (from business groups to market vendors)

• Companies in different sectors (real estate, construction, hotel and restaurant, telecom, production, trade and retail)

What are research themes?• The company (activities, sector, relationships to

government, management, family business, partner firms etc.)

• History of the business, and of the entrepreneur and family

• Chinese background, language and business

Family business: strategies

The family seems very important for Cambodian-Chinese business success in Phnom Penh. Family relationships are deployed in different ways:• Managing the company (example: construction company)

• Education abroad (example: hotels)

• Import and retail (example: market vendors)

• Property and investment (example: coffee shop)

Family business: generational change• Within family businesses, there seems a large gap between the

older and the younger generation in how they want to set up the family’s company.

• Older generation: insecure environment, start from scratch, practical experience.

• Younger generation: security, relative wealth, educated (often abroad).

• This results in different preferences in doing business and organizing the company:

• Older generation: informal practices, keeping control and finances within the family, trust-based relationships (no contracts), hard working

• Younger generation: Formalize processes and structure the company administratively, hiring outsiders, spending money where desirable, stress on human resources.

Generational change in a production company

“The problem is that my parents don't want to discuss the situation with anyone that is an outsider, they don’t want to spend money, and they keep doing everything themselves. Seriously, if you don't consider the physical tiredness of running that business, we're very efficient. We run the whole factory with just three people [himself, his father, and brother in law], up to micromanagement, every day. We have no structure whatsoever. They've been doing it for 20 years, it's entrenched in their way of business. I have all these ideas in my head on how to structure the company, but they think I need more practical experience. They used to wake up at 5 o’clock every morning and they want me to do the same thing. But I just don't think it's efficient, and besides, it's stupid if you earn so much money to wake up at 5 o'clock…

Generational change in a production company

… I am now working on a system to keep track of everything; the prices of our products, what we sell to different retailers and customers, whether we get the correct amount when supplies come in, see if people are not cheating us. Before, my parents had no clue. They paid for the same thing twice and they would never even know. But it’s sort of working now. My parents now start to ask me; ‘how much do I own this person?’ or ‘how much does this material cost?’ I am becoming a computer on which they can click and then the information comes out. It's getting better, they're more receptive because they've seen some results.”

Ethnic networking arrangements

• Many of the thriving business families that exist today started in the 1980s and early 90s by importing all sorts of products from Singapore, Bangkok, Southern China etc. Within these trade networks, trust derived from common ethnic background, and sometimes language (Teochew dialect) were still important according to interviewees.

• Today however, shared ethnicity is hardly ever a ground for doing business. Where people still do business with co-ethnics in the region or with mainland China, these are newly established and opportunistic relationships rather than based on shared ethnic background or language.

• Revitalization of Chinese language and business in Phnom Penh, but not necessarily linked to Chinese roots of its population.

Ethnic networking? An example

Prominent Cambodian-Chinese business woman who is in trade, real estate, hotels, and infrastructure development. Was a child during the Khmer Rouge, and although she learned some Teochew from her mother, she was never able to study Chinese properly. In the mid 1980s, she started importing goods in cooperation with a Singaporean-Chinese. She has since done business with Japanese, Malaysians and Europeans.

Whereas her Teochew background was still relevant in regional trade during the 1980s and early 90s, since Cambodia started to open up she has done business with Westerners and other Asian countries.

She is now starting to learn Mandarin so she can better get along with business people from mainland China that come to invest in Cambodia.

Locally grounded or transnational practices?

• In general, business success is dependent on having ‘good connections’ within Cambodia, especially where it concerns large companies and projects.

• Relationships with investors and funding agencies from abroad are important, but state actors mostly stand in between such investments and the local business community, it seems.

• State actors are involved when it concerns certain business activities, such as:

• real estate and construction contracts

• land concessions

• import and service monopolies

• customs, licenses

Good connections

Arguably, different stakeholders put very different pressures on business people, especially when it concerns large-scale business projects:

• Business people have to be accountable towards foreign investors and development partners, or to agencies such as the WB and ADB.

• And they need to maneuver within the personalized business-cum-state structure to be able to realize their business projects.

In interviews, business people often talk about transparency, accountability and business ethics, but also about how ‘good connections’ are an inevitable component of the Cambodian business climate.

Notions of ‘Chineseness’ 1

• Ethnic boundaries are very ambiguous in terms of ethnic descent, language and identification.

“80% of the population in Phnom Penh is mixed Cambodian-Chinese. You can't really find a ‘real’ Cambodian anymore.”

• ‘Chinese’ business practices (family business, trust relationships, financial independence etc.) are recognizable, but nestled in the Cambodian economy and not always identified by interviewees as a Chinese legacy.

When one interviewee was asked what he thought was typical about Cambodian-Chinese businesses, he replied: “I don’t know, I can’t really think of another way of doing business in Phnom Penh”

Notions of ‘Chineseness’ 2

• People identify themselves mostly as Khmer (or Khmer-Chin), but do generally think that their inclination to do business has to do with their Chinese background.

“Chinese are very hard-working and don’t spend a lot of money but save it for later. We think about the future of our family so that they will have money or a business. Business is in our blood.”

Same person:

“I feel Khmer, but everybody calls me Chinese. I speak some Teochew dialect, but I cannot read or write, and I don’t speak Mandarin. I’ve been in China, but only for holiday. My mother and father are from Cambodia, I am from Cambodia, so how can someone call me Chinese right? I know I have Chinese blood, but people in the government have Chinese blood also, but they are called Khmer. If you do business, you are Chinese, if you work for the government, you are Khmer.”

Notions of ‘Chineseness’ 3

• ‘Chineseness’ in Phnom Penh is very much linked to entrepreneurship and business success.

Business woman:

“Chinese culture has changed minds, changed the way to do business in Cambodia. They had nothing and then tried to make it by working hard and saving money. In Chinese culture we say that if we try hard, we can do it, not in the next life, but in this life.”

Tuk tuk driver:

“I wish I had someone Chinese in my family. I come from a poor farmers village, just like most of my friends. But some people in their family married to a Khmer-Chin, so now they have money.”

Business in the context of Cambodian history 1

The preliminary findings presented above should be seen in light of Cambodia’s history. During the 1970s (and 1980s) business life was completely uprooted, as were any connections to the outside world. Most businesses had to be built from the ground up in the early 1990s, without much financial resources, and in a weak institutional and financial environment. This situation has shaped business conduct;

• In a lot of cases, the family was the only stable foundation for financing, setting up and consolidating business. Although preferences of business conduct among the younger generation are changing, financial resources, management, and control are still in the hands of family members in most businesses.

Business in the context of Cambodian history 2• Outside the (extended) family, ethnic networking

seems hardly present in Phnom Penh today. Mostly, during the 80s and 90s, existing networks were cut off, and people lost their ability to speak Chinese because the language was outlawed. Ethnic Chinese have been prominent in trade and business for centuries, and so one may argue that ‘Chinese ways’ have nestled in the Cambodian economy. Existing networks are not ethnically defined however.

• Businesses are grounded in Cambodian politico-economic life. The consolidation of state institutions, and the formulation and enforcement of law, is ongoing but incomplete. Rather than on bureaucratic procedures, business people rely on personalized relationships between the private sector and the state.

Business in the context of Cambodian history 3

• During the French protectorate and the Sihanouk period, ‘Chineseness’ in Cambodia was more or less delineated. The Chinese communities were organized socially and administratively, and filled certain economic niches. However, because of the repression of Chinese business, language and culture during the Khmer Rouge and Vietnamese, because of complex migratory processes, and because of ongoing intermarriage and generational change, ‘the ethnic Chinese’ has become a highly ambiguous category. Chinese business practices and identification have become an integral part of Cambodian society and economy, but are no longer clear characteristics of people.

Questions for discussion• Do you agree that family strategies and ‘good

connections’ are the two main paths towards entrepreneurial success in Phnom Penh?

• Do you know examples from your own environment that support or contradict the presented findings?

• For entrepreneurship to take root, what do you think are encouraging or discouraging aspects of the Cambodian economy and society?

• Do you agree with the statement that Chinese identity is closely associated with doing business in Phnom Penh?